The All-Money-Down Technique
How does an all-money down technique work Birla Tisya Apartment when you buy a house with cash? Let me first say that although I didn’t have cash, I did have equity from Terry’s house and other homes I owned that could be used to make a large cash down payment. Both banks and mortgage companies will accept money from a home equity line of credit to buy a house. They did so in 1997 according to the financial guidelines. The thing about mortgages and loans is that guidelines change all the time. This means that the strategy I used in 1997 may not be possible in the future. It doesn’t matter if it can or cannot be used again. I believe there will always be a way for you to purchase real estate with limited funds down sooner or later. Although there will always be a way to acquire real property, I am not sure how it will be done in the near future.
I started buying homes in Philadelphia’s Mayfair area with prices in the $30,000-$40,000 range. A home with three bedrooms, one bathroom, a kitchen, dining area, living room and basement would be ideal for me. A row home in Philadelphia is a home with a porch at the front and a yard that is the same width as the home. Row homes in Philadelphia typically measure less than twenty-two by twenty-two feet. If you aren’t from Philadelphia, and don’t know what a row home in Philadelphia looks like, you can watch Rocky. You will be tested on your ability to live with neighbors when there are 22 homes on either side of each block. Parking, noise from your children, trash cans and appearance are all common reasons for a fight with neighbors in Philadelphia.
My girlfriend and I moved in 1998 together to Warminster, a suburb of Philadelphia. Rocky lived on Tacony’s street and I was excited to have space between my house and the next-door neighbor. Terry told me not to think about speaking with people next to us. I told Terry that if one of the neighbors comes over with a fruitcake, I will take it and throw it into their yard like a football. Philadelphia row home syndrome was what I believed I was experiencing. Although my Warminster neighbors were wonderful, it was eighteen months before they became open to me.
You just purchased your Mayfair row home for $35,000 and, after paying $2000 closing costs and $5000 repair costs, you have a great tenant who is eager to rent the property. With a positive cash flow rate of $200 per month, you have an outstanding debt on your home equity credit of $42,000 that must be paid. I didn’t get a mortgage when I bought the house. I purchased the house for cash, not for a mortgage. I used the home equity line of credit to pay all of the money I spent on this property.
Now is the time to pay off your home equity line of credit and get it repaid. Now, we go to the bank with our fixed-up property. We tell the mortgage department that we want to cash-out your real estate investment. This helps explain why the price range for the neighborhood where you buy your property should be wider than the Mayfair neighborhood in the mid-90s. It is not common for homes in Mayfair to have different home values. You would see a difference of $3000 between blocks. This was crucial when refinancing a cash-out because the bank can easily see that I bought my property for $35,000 despite the fact that it had been renovated. It was possible to justify that I spent more on my house to fix it up. By letting a tenant live there, it became a profitable piece in real estate investment.
If I was fortunate enough to be able to purchase homes in Mayfair, the appraiser would visit homes within a block and return with an appraisal for $45,000. There were programs back then that allowed investors to buy a home with a 10% down payment or leave it as equity and do a 90 percent cash-out refinance, giving me back approximately $40,500. This allowed me to get most of the money that I had put down on the property back. This new home cost me $1,500 to buy. Why were the appraisers and mortgage companies giving me different numbers? They wanted to get the business. I would tell the bank that I need it to come in at $45,000, or that I will keep it financed as-is. They were always able to provide me with what I needed within reason.